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November 11, 2011 7:55 pm
Four years ago Robert Frank, a journalist, wrote a fascinating account of America’s elite entitled Richistan. It was a potent snapshot of a gilded age, describing in voyeuristic detail the armies of staff, multiple jets, and colour-co-ordinated 30,000 sq ft mansions that the US’s billionaires enjoyed before 2007. “I don’t carry a flag in the class wars,” explained Frank, The Wall Street Journal’s self-described “wealth reporter”. “I’m not out to celebrate or castigate the rich ... [but] to report on the world of wealth just as I covered foreign countries as an overseas correspondent, describing [it] to readers far away.”
Last week, Frank produced a second “dispatch”, The High-Beta Rich. This is doubly intriguing. For if Frank is correct, parts of “Richistan” are in turmoil: as markets have gyrated since 2007, fortunes have been lost, assets seized and lifestyles crunched. Thus, we hear about the Siegel family who were building a Florida mansion called Versailles, so vast they needed Segways to cross it, until in 2008 their property business was heavily hit by the credit crisis. Now their pools, bowling alleys and cinemas lie half built. Then there is the Blixseth family, who were one of America’s richest families (322 on the Forbes rich list) in 2006. Edra Blixseth is now so bust that creditors have even seized the coral from the fishtanks.
More fascinating still, a new class of “repo” – or “repossession” – men are stalking the land, seizing jets, boats, paintings and other baubles from the wealthy who have defaulted. “There is an art to taking the prized possessions of the rich,” Frank explains, recounting how these repo men sneak into private airfields, after being tipped off by mechanics, storm jets and fly away, as their (former) owners relax in the airport lounge. “Between 1995 and 2010 the number of private jets in the air more than doubled, from 7,176 to 17,199,” he adds. “With prices of private jets now falling by more than half, many jet owners who used borrowed money are now upside down … leading to rising loan defaults.”
What should the non-jet-owning population make of this? Many may snort with derision, particularly those sitting in Occupy Wall Street. After all, for every millionaire – or billionaire – who has lost a jet, many more have remained ultra rich. And losing a swimming pool is trivial compared with the suffering of the US’s poor, who have lost homes and jobs. Moreover – and as statistics from the Congressional Budget Office underscored in October – inequality is rising: since 1979 the incomes of the top 1 per cent have risen 275 per cent while the bulk of Americans have seen incomes rise by just 40 per cent.
But what makes Frank’s book fascinating is that it comes amid what I suspect could be a wider shift of attitudes towards wealth. During most of its history, American society has admired, not resented, Richistan because there was a widespread belief that anybody could get rich, if they were smart enough. The dream – or myth – of mobility was the glue that helped keep America together. But now there are growing fears that mobility is in steep decline: some statistics suggest that the poor Americans have now have less chance of rising into that “1 per cent” league than in parts of Europe. And that loss of faith in this mobility dream – or myth – is prompting rising unease, over and above any anger about the presence of Richistan.
In some senses, Frank’s book should offer support for that American dream. If there has been downward mobility among billionaires since 2007, it should theoretically create space for others to rise: one person’s lost jet is another’s opportunity. However, statistically it is not clear that there has been enough downward mobility to create meaningful “space”. Moreover, there is a darker twist too. Frank’s data suggest swings in wealth creation and destruction have become much more violent in the past four decades. It would be nice if this was due to meritocratic, competitive churn. In reality, it appears to reflect the fact that modern American wealth has been increasingly created through financial trading and assets, rather than manufacturing, say. Thus, as markets have swung, so too has the wealth of Richistan – and doubly so, since it has become debt-fuelled.
This has had a pernicious impact on the wider economy: see Frank’s account of Aspen or California. But I suspect it has been corrosive for the political debate too. If an elite feels secure in its position – or shamed into a sense of obligation into wider society – then it is easier for them to display noblesse oblige, to voluntarily abandon tax breaks on corporate jets, say, or engage in philanthropy. But if the elite feel that their wealth is fragile, it is harder for them to display that generosity of spirit or cash. Little wonder there is so much anger and gridlock around. If there is one thing that links Occupy Wall Street with Richistan, it is anxiety about the future. Even for those who (still) fly jets.
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